Things are changing in Germany's healthcare system. Cost pressure, new technologies, and business models are shaking up existing structures. Smartphones are becoming medical devices that allow users to focus more intensively on their recovery, allowing patients to be more actively involved in their treatment. At the same time, emerging business models are changing the balance of power between pharmaceutical giants, health insurance companies, and patients. Startups are playing a key role in shaping this transformation. — This article first appeared in Baystartup magazine. Startup date 03/2019.
The next few years could see rapid developments in healthcare. Healthcare pathways will become more effective and interconnected, while patients will increasingly take control of their own health. Legislators are also now actively promoting digital solutions: Electronic health records are expected to be implemented by 2021, and we will soon see the introduction of electronic prescriptions. The liberalization of digital remote treatment almost a year ago is facilitating new concepts in telemedicine. Important cornerstones such as modern practice software and electronic patient records still need to be adopted across the board.
New paths that startups are taking here and that we have seen in the Baystartup portfolio in recent years focus primarily on four thematic areas:
1. E-Health
2. Process optimization
3. Diagnostics
4. Tools for med- and biotech companies
Startups have been developing exciting solutions in this area for years. They range from therapy assistants to drug development, concepts for improved medical care, and analysis services that look into our individual DNA to life-extending therapies. However, their approaches have often failed due to the hurdles that young companies in particular face in the healthcare market: health insurance companies cannot prescribe their products, access to sufficient (start-up) capital is not always available, certifications and documentation requirements tie up enormous human and financial resources – and sometimes players and potential customers in the market simply lack an understanding of digital technology and new technologies.
"For us, especially at the beginning, three years ago, it was a huge challenge to overcome bureaucracy and regulations. Many things weren't even applicable to digital products or processes at the time. We had to do a lot of convincing and find those within the healthcare system who were willing to put their trust in a young, motivated team with new ideas,"
says Gloria Seibert, founder and managing director of Temedica.
“Whether it’s online consultations or automated laboratories for faster, more reliable cancer diagnoses, the healthcare industry is beginning to grasp the opportunities that digitalization can bring for patients,”
says Inveox-Managing Director Maria Sievert.
“For us, this is exactly the right first step towards optimized and personalized care of the future, for the benefit of the patient.”
In order to ensure their future viability, all players – not just startups – must avoid their innovations becoming isolated solutions. According to Sievert, in addition to interdisciplinarity, interoperability is also one of the major requirements for new and further developments. Many digital solutions from startups are now so mature that they can also serve the specific requirements of the healthcare sector.
Trend topic: E-Health
In short, purely digital solutions from startups are often described under the keywords “Digital Health" or "e-health." The focus is on applications that support the treatment and care of patients, leveraging the opportunities offered by modern information and communication technologies. The focus is on communication between patients, as well as support in preventative care, diagnosis, and therapy. An important piece of the puzzle in the context of digital health are digital therapy assistants that link different areas and players in the healthcare system. For many of these, the business models would not be possible without the intelligent use of big data or artificial intelligence.
Neolexon from the Plant1 in Munich is developing a therapy system using digital training via tablet that enables individualized therapy for people with speech disorders following brain damage. An app for therapists can be used to organize, conduct, and adapt the therapy. An app for patients enables independent training at home. It is individually adapted for each patient by the treating speech therapist – something that was previously hardly possible in practice, as only a limited vocabulary in the form of paper photo cards was usually available. The Neolexon database gives the therapist access to 7,800 words and 1,200 sentences and the corresponding photos. This allows the patient to specifically practice the words they need in everyday life and that are appropriate for their specific speech disorder.
8sense, a company from the Digital Startup Center in Rosenheim, is developing a platform of virtual coaching systems to help combat back pain. The solution, consisting of a sensor clipped onto the collar and a mobile app, aims to empower people to better understand their posture and back movement, and thus the causes of their back pain. Haptic feedback from a sensor, visual representation, combined with interactive exercises, motivates the user to adopt a healthy back posture. In everyday life, the 8sense clip provides direct feedback through gentle vibration patterns if the user has maintained a rigid posture for too long, helping the wearer change their position and thus sit more dynamically. The coach visualizes everyday behavior and aims to initiate behavioral changes. Unlike other apps, the coach learns not only from the user's subjective feedback. It also considers the training and everyday activity recorded by the 8sense clip, the behavior of all other users, and learns from expert input for individualized training plans.
Vision Health offers digital therapy support for patients with respiratory diseases. A broad digital platform for those affected is being created under the Kata brand. As a first step, VisionHealth has developed an intelligent app for patients to increase the effectiveness of inhalations using only their smartphones: Kata eliminates errors in inhaler handling through automated inhalation training and immediate feedback to patients. Using an algorithm, the app recognizes the inhalation maneuver, evaluates effectiveness, and can correct any errors without the need for on-site or remote medical expert support. To achieve this, VisionHealth uses technologies such as artificial intelligence, augmented reality, machine learning, and computer vision.
Temedica develops digital solutions that accompany and support patients throughout their healing process, for example, in patient care in the areas of therapy and prevention. Doctors and therapists can prescribe and adapt therapy content and monitor progress.
“What’s special about Temedica is that we don’t just offer a digital companion for a specific disease,”
explains Managing Director Gloria Seibert.
"Rather, we develop customized digital solutions for various medical indications based on our existing products. This allows us to reach a wide range of patients with many different diseases."
Machine learning enables long-term medical care for patients. The demand for these concepts is also demonstrated by the fact that Temedica products are now reimbursed by many health insurance companies; in some cases, the company, founded in 2016, is even directly connected to their systems.
Apps that empower patients
This process is M-sense is still to come. With its app, the startup aims to involve patients even more closely in the course of therapy. M-sense helps people with migraines or tension headaches reduce the number of headache days and medication use by 30 to 50 percent. The M-sense app enables them to analyze their individual triggers and actively take action against their pain. M-sense was the first migraine and headache app to be certified as a medical device in Germany and remains the only offering to date that offers multiple effective treatment methods in addition to documentation options. Patients can share a doctor's report with their attending physician from the app and use the medication tracker to ensure appropriate medication intake.
“This makes every doctor’s visit more efficient and supports treatment and diagnosis through graphically prepared evaluation,”
says Managing Director Florian KoerberOver 220,000 downloads speak for the concept. Next year, the Digital Healthcare Act is expected to come into force, allowing medical prescriptions for services like M-sense. This will not only make the service approved and available on the healthcare market, but will also be reimbursed by health insurance companies.
Process optimization for healthcare and industry
Due to digitalization, the topic of process optimization is becoming increasingly important. This includes both administrative processes in the healthcare sector and increasing the efficiency of processes, for example, in laboratories in collaboration with supervising medical facilities. Laboratories want to analyze samples more efficiently and feed their analysis results back to doctors and hospitals using a more precise database. The startup Inveox has developed a solution for this area. The company's vision: reliable and faster cancer diagnosis through a fully automated, networked laboratory, from the preparation of the removed tissue to the analysis of the tissue section on the slide. The approach combines a web platform, intelligent sample containers, and an automated system that can process multiple samples simultaneously, replacing previously manual and error-prone steps in the laboratory, especially at sample receipt. Doctors and pathologists are informed in a structured and automatic manner in real time about the current status of the sample – from shipping to diagnosis.
Climedo offers a digital assistant to support physicians in the safe and efficient implementation of personalized cancer therapies. While over 50 percent of all clinical trials are currently conducted on paper, the startup enables healthcare professionals to conduct clinical trials faster through its platform, improving the quality and collaboration between physicians, patients, and industry partners.
IT-Labs is developing the first intelligent care management platform for chronically ill patients, supporting staff in the home care and assistive devices market via smartphone, tablet, and PC. The software is the first to enable a truly evidence-based determination of individual patient product needs. Medical history data narrows down the product selection to such an extent that the software user no longer needs to make a subjective decision. This ensures optimal patient care with products based on scientific standards.
Holistic approaches
The blurring of boundaries between process optimization, digital health, and traditional medical technology is clearly demonstrated by the example of Mecuris. The Munich-based medical technology startup is developing an online platform on which orthopedic technicians without CAD design knowledge can design patient-specific and CE-compliant orthoses and prostheses. Together with the patient, they can realize their wishes regarding design, color, and structure. Customer satisfaction and acceptance of the care increase significantly, and orthopedic technicians save time and money. Digitization and 3D printing not only enable greater customization but also better networking between orthopedic technicians and medical device manufacturers. The entire process chain is digitized from the very beginning, thus creating new business models.
“All of this combined means that the pressure on the industry is increasing and orthopaedic technology is on the verge of digital transformation,”
says Wolf-Peter Werner, CFO at Mecuris.
“The possibilities offered by technologies such as industrial 3D printing in the healthcare sector will develop rapidly, ideally leading to a better quality of life and joy of life for the user.”
According to Werner, early adopters of these possibilities could gain a valuable advantage. Tomorrow's solutions will make diagnoses more accurate, faster, and more efficient.
“German startups in the life sciences sector in particular are often characterized by a very scientifically sound basis,”
says Christian Leikert, Partner at Creathor Ventures and responsible for healthcare investments.
“This applies to all areas currently in the focus of investors: gene therapy, immunological approaches, and many others.”
The research landscape in Germany is also very well positioned in international comparison, says Andreas Huber from Bavaria Capital.
“However, there is still potential for improvement in the implementation of invention into innovation, although in recent years, more and more initiatives of all kinds have been launched in this country.”
Digital components can be used in areas such as diagnostics, therapy, or drug development. Many of these approaches are driven by the goal of developing personalized solutions for patients, rather than pursuing a one-size-fits-all approach.
This is how Plasmion As a young company, the company goes far beyond a purely digital approach. With its patented SICRIT technology, the startup offers an extension for laboratory devices. It transforms the devices into an "electronic nose." For the first time, laboratories can measure samples directly by holding them up to it and freely combine them with other analytical devices. The startup's technology enables, for the first time, the fully automated use of such laboratory devices as "odor sensors" not only in medical diagnostics, but also in industrial process control and the security industry (e.g., explosives).
Wellabe (formerly Bodylabs) has developed a mobile laboratory to bring diagnostics to people's workplaces. In less than 20 minutes, over 60 health parameters are measured and analyzed in the Wellabe app. Employees can then discuss their health status with a doctor via video consultation.
“Based on these tangible medical values, users not only receive understandable explanations of the measured values in the app, but also personalized prevention programs,”
explains Managing Director Michael Theodossiou by Wellabe.
Numares, based in Regensburg, develops in vitro diagnostic test systems for clinical diagnostics. These systems, for example, allow a wide range of metabolic products in blood and urine to be identified and quantified in a single measurement in a very short time. This simultaneous representation of metabolism allows, among other things, the prediction of developing diseases such as atherosclerosis, but is also of great importance in pharmaceutical development. Because the method is very fast, large segments of the population can be examined quickly and inexpensively for the first time. Founded in 2004 under the name Lipofit Analytic as a spin-off from the University of Regensburg, the company achieved its commercial breakthrough in 2013 with a major contract from a US laboratory chain. Additional indication areas are being developed, for example, oncology and transplantation.
Ithera Medical, a spin-off of the Helmholtz Zentrum München (HMGU) launched in 2010, has developed an innovative imaging technology for diagnostics. It converts laser pulses into acoustic signals, which then become three-dimensional images. In addition to anatomical imaging, the method also provides functional and molecular information in real time. This allows tumors and inflammatory diseases, among other things, to be detected easily, precisely, and without invasive procedures.
Nanotemper Technologies researches, develops, and produces biophysical laboratory measuring instruments for basic research and drug development. This product portfolio has a unique technological selling point: It enables significant time savings in the determination of biomolecular properties in research and development. The average test duration is reduced from 144 hours to just 1.5 hours. Furthermore, 40 times less material is required for the tests. Using Nanotemper technology, pharmaceutical companies can save approximately three months of development time in an early phase.
Dynamic Biosensors, a finalist in the 2010 Munich Business Plan Competition, works in the field of protein analysis. His patented analysis system is used to test the efficacy of medications. It allows, for example, the development of drug candidates for pharmaceutical research. Drug manufacturers can produce active pharmaceutical ingredients quickly, specifically, and efficiently, and pharmaceutical researchers can determine whether a new drug will reach its target in the body and effectively combat diseases.
Tools for the BioTech and Pharma Industry
The example of Dynamic Biosensors demonstrates that the boundaries between medicine and healthcare of tomorrow are becoming increasingly blurred. Founded in 2012, the technology company has the potential to enable new medical diagnostics with its approach. At the same time, it provides the industry with an important tool for driving innovations in the pharmaceutical and active ingredient sectors. This is precisely an area in which additional teams from the Baystartup network have been able to establish themselves in recent years.
Bicoll offers preclinical services and research in the field of drug development from natural products and medicinal chemistry. The Martinsried-based biopharmaceutical company specializes in the discovery of novel active compounds in plants supported by strong medicinal chemistry. Bicoll focuses on providing solutions for pharmaceuticals, cosmetics, nutraceuticals (e.g., dietary supplements), and agriculture.
Chromotek, a life science company founded in 2008 and developing products for biomedical and pharmaceutical research, has also successfully established itself on the market. Chromotek operates as a supplier of innovative technologies to the research industry at an early stage of the pharmaceutical value chain.
"We are equipping scientists around the world with innovative antibody tools to accelerate their research toward the next breakthrough. We are literally giving researchers better shovels to dig for gold faster,"
explains Chromotek Managing Director Marion Jung.
“Our technologies, tailored to specific applications, benefit from the special properties of alpaca nanoantibodies.”
The immune system of alpacas and other camelid animals produces not only traditional antibodies but also so-called nanobodies. These are particularly small, simple in structure, and very stable.
"Such a nano-antibody is like a multi-tool that can be coupled to other proteins, nucleic acids, or chemical molecules and dyes. In the laboratory, we can genetically adapt them or equip them with special properties."
In addition to research applications, nanobodies offer considerable potential in medical diagnostics and therapy. They offer particular advantages for innovative therapies in immuno-oncology.
Financing opportunities for startups
In recent years, according to Andreas Huber, Investment Manager at Bayern Kapital, the financing situation for startups has generally improved.
"On the VC side, there's more money in the market today than there was a few years ago. You're seeing larger rounds, especially at the international level."
The large pharmaceutical companies often only acquire innovations and focus on late clinical phases of development and sales.
“This presents a great opportunity for startups.”
“There is currently a lot of capital in the venture scene, and attractive investment opportunities are in demand,”
also explains Peter Graf from BayBG. In addition to VCs, corporates and CVCs are also increasingly active in this segment.
"Large medical technology and pharmaceutical companies also regularly invest in startups. At the same time, we are also seeing more and more investors who do not have a specific industry background in healthcare, life sciences, or medical technology,"
says Graf. Experts from the Baystarteup investor network consider the digitalization of healthcare and life sciences—especially the application of artificial intelligence—to be particularly promising for startups and investments.
“At Creathor, we are currently paying particular attention to solutions that include digital components, even though it is not yet easy to apply proven business models as the field is still in its early stages,”
says Christian LeikertSince capital markets expect digital strategies from large companies in the healthcare sector, there are many exit opportunities here. Since the healthcare market in Germany is heavily influenced by health insurance companies, solutions that serve the interests of health insurance companies as well as patients and consumers have the best chances of attracting capital.
“For example, if a company succeeds in simplifying the exchange of information between doctors, patients, health insurance companies, laboratories, etc., health insurance companies save costs and patients receive better treatment,”
explains private investor Stephan Huber.
Meanwhile, the development between Germany or Europe and the USA is continuing to diverge in the area of financing, observes Christian Leikert, Partner at Creathor Ventures and responsible for healthcare investments:
"Not only is there significantly less venture capital available in this country to finance young companies in the healthcare sector, but German companies also rarely act as buyers for local startups."
Young European companies typically have to look for growth capital abroad, particularly in the US and Asia, starting with the Series B financing round. In the US, there are significantly larger funds and – also not to be underestimated – an additional exit channel: the NASDAQ.
Room for improvement
Through optimal integration of medicine and IT, patients will be able to benefit from better diagnoses and personalized treatments and therapies in the future. Two topics are in the spotlight here: Big Data and Artificial Intelligence – that is, the capture and visualization of data on the one hand, and the use of data on the other. Startups are working on concepts and business models for personalized medicine that utilize these key technologies – even if we currently don't see many examples that have truly established themselves on the market in this area. Requirements for reimbursement of services are increasing. Regulatory challenges are also complicating the path to market, especially for young companies. The expectation of investors and customers to create more health at lower costs means that founders must generate published evidence on efficacy and cost-effectiveness as quickly as possible in order to become and remain the first point of contact for doctors, patients, and health insurance companies.
